---
title: "How Can Distributors Enhance Their Core Competitiveness?"
description: "Many distributors have been in the business for over a decade, yet still operate with a small team and a tiny store, while newcomers have already achieved great success. The key to success lies in market insight, network control, internal management, and ambition. This article discusses how distributors can improve their core competitiveness."
author: "New Distribution"
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published: "2014-08-09"
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# How Can Distributors Enhance Their Core Competitiveness?

> Many distributors have been in the business for over a decade, yet still operate with a small team and a tiny store, while newcomers have already achieved great success. The key to success lies in market insight, network control, internal management, and ambition. This article discusses how distributors can improve their core competitiveness.

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Many distributors have been in the business for over a decade, yet still maintain a small operation with three to five people and a store of just over 10 square meters, struggling to survive. Looking back, many newcomers have already made waves and dominate the market. "Each generation brings forth its own talents." Modern society is always full of opportunities, with gold everywhere; the key is whether one has the vision, courage, and luck to seize them. Distributors often start from a low base with weak foundations. Their operational methods are similar, but their fates differ greatly. The fundamental reason lies in their varying judgment of market conditions, control over sales networks, internal management levels, and pursuit of future development. Any enterprise, regardless of industry, must enhance its core competitiveness to lead the industry. For distributors, where does their core competitiveness come from? Let me elaborate point by point.

**I. The Foundation of a Distributor: Distribution Network**

In the market, distributors are positioned as channel intermediaries. Manufacturers set up distributors in various regions mainly to cover retail terminals through them. The sales network controlled by a distributor is the primary condition for a manufacturer to choose them. Distributors are the link between manufacturers and retail terminals, earning profits by distributing goods. Therefore, the more complete and systematic the distribution network within their operating area, the higher their status in the manufacturer's eyes, and the greater their sales potential. When building their distribution network, distributors should avoid the following four major pitfalls:

1. **The wider the coverage, the better.** Some distributors, just starting out, rush to position themselves at the prefecture or even provincial level, without considering their financial strength or operational capability. They think that expanding the distribution area increases sales opportunities. "Sow widely, reap thinly"—they believe they will get something. However, the actual effect is not so. If the distribution area exceeds what they can control, it leads to waste of limited resources and low efficiency. Second, it becomes difficult to achieve the targets set by the manufacturer, making it hard to gain strong support. Third, as the manufacturer's market operations advance, they may carve out the half-developed market, leaving you to work for others.

2. **The broader the distribution system, the better.** Distributors' distribution systems generally fall into four types: modern channels (supermarket systems), traditional channels (circulation systems), catering channels, and special channels. Some distributors habitually try to cover all systems, but the effect is counterproductive. The main reasons are threefold: first, insufficient capital reserves lead to cash flow shortages. Second, the product structure determines that some channels have high operating costs, making them not worth the effort. Third, distributors have different social networking abilities, and some channels require social resources they lack.

3. **The more sub-distributors, the better.** Some distributors think that more sub-distributors mean higher market coverage. Using sub-distributors can accelerate capital turnover and reduce the tedious work of store visits. So many distributors are eager to develop a large number of sub-distributors. But don't forget that too many sub-distributors can plant landmines for you. First, when sub-distributors are small, they are happy to source from you; once a product's volume grows, they think about going independent, causing you to lose your sales area for no reason. Second, sub-distributors are often the culprits of channel conflict; manufacturers can't punish sub-distributors, so the blame falls on you.

4. **The thinner the distribution profit, the better.** Many distributors lower their profits to attract sub-distributors, even selling at cost, just to earn manufacturer rebates. Their purposes are twofold: small profits but quick turnover—though profit per unit is thin, volume increases and they still make money. Second, this product may not be profitable, but sub-distributors help sell other profitable products. However, in practice, this approach has many drawbacks: First, distributors should seize opportunities to earn what they should. For products on the rise, pressing distribution profits too low will miss profit opportunities. Second, it trains sub-distributors to bargain and use price as leverage. Third, it may irritate the manufacturer, as disrupting product prices can lead to penalties.

**II. The Survival of a Distributor: Smooth Cash Flow**

In business, distributors need two essential conditions: network and capital. Distributors sit between manufacturers and retail terminals. Manufacturers usually require cash on delivery, with little credit extension. Retail terminals often have accounts receivable. A distributor's financial strength often determines their development scale. Maintaining smooth cash flow is essential for normal operations. Distributors should note the following points to keep cash flow smooth:

1. **Control the number of products.** Many distributors have a "greedy" habit; the more products, the better. They think: first, more products mean fuller utilization of customer resources. Second, distribution costs decrease. Third, new sales opportunities arise. But too many varieties disperse your operating capital and attention, weakening your core product advantages. Distributors should choose product varieties based on their capacity. Sometimes 1+1 may not equal 2.

2. **Selectively enter supermarket systems.** From the manufacturer's perspective, they want their products in all supermarket systems in the distributor's area. But distributors must evaluate each supermarket system, checking their payment reputation, credit terms, and operating conditions. Prioritize those with short credit periods and good business. The number to enter depends on your financial situation and risk tolerance. Leave room for yourself. When you have cash flow problems, the manufacturer won't consider how much you have tied up in supermarkets.

3. **Operate more cash-on-delivery retail stores.** Many small and medium-sized retail stores in various regions operate on a cash basis. Operating more of these stores may increase transportation costs, but capital turnover is faster. As long as the distributor provides good service, the volume from these stores can be substantial each month.

4. **Establish an effective accounts receivable management mechanism and customer credit system to reduce business risk.** (Details will be discussed in a later chapter.)

**III. The Value of a Distributor: Bridging the Gap**

In the entire sales environment, there are three key connection points: the manufacturer-distributor interface, the distributor-retailer interface, and the retailer-consumer interface. Distributors occupy two of these. Therefore, the distributor's value lies in bridging the manufacturer and the retailer. How to do this well and demonstrate value? Distributors should do the following:

1. **Terminal maintenance.** Many distributors think terminal maintenance is the manufacturer's job. Indeed, many manufacturers do this work. But relying solely on the manufacturer is far from enough. Please note: the more specific the manufacturer's work, the less important the distributor becomes. So distributors should take on this responsibility to gain greater manufacturer support.

2. **Inventory management.** Ensure your inventory and retail terminal inventory stay within reasonable limits to avoid stockouts.

3. **Information feedback.** Distributors should promptly feed market information back to the manufacturer. Distributors are at the forefront of the market, knowing any changes first. Report competitor actions and market trends to the manufacturer so they can respond quickly, maintaining product competitiveness and close cooperation.

4. **Execution of manufacturer promotional policies.** Distributors are often the final executors of promotional policies. Strictly implement company policies, do not withhold promotional funds, and ensure activities are not distorted; these are part of a distributor's duties. Far-sighted distributors are firm executors of the manufacturer's sales policies.

**IV. The Distributor's Status: From Lover to Wife**

The relationship between distributors and manufacturers is often delicate. Cooperation agreements are usually signed annually; manufacturers frequently change distributors, and distributors often eliminate slow-moving products. So the relationship is at best a lover relationship. It is classified as such for several reasons: first, low loyalty and lack of future planning. Second, the foundation is weak; minor issues can lead to breakup. Third, the relationship is often more emotional than rational, lacking shared market philosophy and cultural identity. Because of this lover relationship, distributors live in fear daily. Changes in manufacturer sales staff, new product launches, and sales strategy adjustments directly affect the distributor's status. How can a distributor successfully transition from "lover" to "wife"? Do the following:

1. **Build an interdependent relationship with the manufacturer.** Lovers have no tomorrow; wives share the rest of life. To become "husband and wife," the key is to find common values. Some distributors think building good relations means eating, drinking, and playing together—being a "three-accompaniment." That is misleading. The drinking culture is absolutely unreliable. Only with common goals, mutual trust, support, and tolerance can cooperation last forever.

2. **Make yourself irreplaceable.** When a man looks for a wife, he initially picks and chooses; when he finds you are the most suitable, he will "marry none but you." Manufacturers and distributors are first a community of interests; if both can bring maximum benefits to each other, the cooperation is irreplaceable. The day you make yourself irreplaceable to the manufacturer, your cooperation will be solid.

3. **Learn to see far and act near.** Don't haggle over small gains. Since you are husband and wife, you shouldn't be overly concerned with personal gains and losses. "Suffering loss is a blessing." Distributors sometimes need to be generous. Be tolerant, think from the other's perspective, and take on more responsibilities. Truly become one family.

**V. The Distributor's Role: A Master Weaver**

The distributor's process is also the process of building a network system. Distributors should become "weaving" experts. This network should radiate from the distributor as the center to every corner. The sales network is often the distributor's greatest resource. To become a "weaving" expert, distributors need the following operational capabilities:

1. **Point placement ability.** In the initial stage of building a network, the first task is placing points. Where each point falls is crucial. This requires a macro perspective. Points should be appropriately spaced, and lines should connect them. That is the sales network.

2. **Network control.** The distributor's net must be cast out and also pulled back. This requires establishing solid cooperative relationships with each sales point and controlling the supply system. Network control is often challenged by other regions; on one hand, cooperate with the manufacturer to control channel conflict; on the other hand, have leverage over retail points. Year-end volume rebates are also effective.

3. **Network repair capability.** After the sales network is built, it is always in dynamic change. If a sales point breaks, a hole appears in the net. If not repaired promptly, the hole grows. Distributors need to repair the break promptly. For example, if a sub-distributor switches to a competitor, find a new sub-distributor quickly.

**VI. The Distributor's Development Skill: Adapt to Needs**

Consumer trends change every year; distributors should follow the trend and act accordingly. Industries develop in waves; when one product category declines, another emerges. The key is whether distributors can keenly perceive changes in consumer demand and seize business opportunities. To achieve this, distributors should do the following:

1. **Keen market insight.** Be good at thinking and summarizing patterns. Industry changes generally follow a three-year cycle; when one category enters decline, a new one rises. The most profitable time is when a new product rises to its peak. When it truly enters decline, although there is still basic sales volume, profits are very thin, making it a "chicken rib" product. Therefore, grasping market trends is crucial.

2. **Be good at promoting new products.** Many distributors think product promotion is the manufacturer's job; they just need to cooperate. This view is one-sided. The successful promotion of a new product requires mutual cooperation and joint effort. From the manufacturer's perspective, if a distributor has strong promotion capabilities, the manufacturer will designate their area as a key promotion region, with more investment. The success rate of new product promotion increases. The result benefits both parties.

3. **Be good at finding new sales opportunities.** As market competition intensifies, sales channel structures are constantly changing. Finding new market opportunities, especially in special closed channels, can yield high returns. For example, a distributor in a coastal city noticed that local fishermen regularly replenish food, beverages, and daily necessities. They set up a special department to handle fishermen's supplies. Because the distributor offered a full range of products at reasonable prices and delivered directly to the boats, they were very popular. Annual sales in this segment reached tens of millions of yuan.

Distributors should closely monitor changes in consumer demand; market demand means business opportunities and wealth.

As the saying goes, "Business is made by people." The personality, knowledge, sensitivity, courage, vision, and goals of a businessperson differ, leading to vastly different outcomes. A successful distributor must have their own success factors.

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